Risk and Safety Management
All too often, individuals and entities encounter various forms of risks. Risks originate from different sources which underlines the value of effective risk management (Kavaler & Spiegel 2003). Attempts by academicians and management practitioners to define the term risk has led to emergence of varying definitions. Therefore, one can argue that there is no definite definition of the term risk. Some of the definitions that have been proposed by different parties are outlined in the table provided in the appendix. This paper comments on the pros and cons, similarities and differences identified from the definitions outlined in table 1 of the appendix attached. The definitions that stand out as different from the other definitions are identified. Moreover, a personal choice of the best definition of risk is identified and explained.
Pros and cons
A number of pros can be identified from the different definitions outlined in appendix 1. One of the identifiable pros is evident from definition number 12 outlined by the Institute of Risk Management and Risk Management Standard in the appendix. According to this definition, risk is defined as events and occurrences that present opportunities and threats to an individual or entity. This definition recognises the fact that it is possible to benefit from risks. However, the benefits inherent in risks can only be attained from effective risk management. Similarly, failure to integrate effective risk management strategies can lead to negative outcome hence limiting the desired success. Therefore, the definitions further underscore the fact that the occurrence of risk can limit the likelihood of attaining the projected objective. Thus, the definitions emphasise on the importance of assessing the likelihood of risk occurrence and the associated consequences in formulating and implementing risk management approaches (Damodaran 2008).
According to the definition advanced by ehow.com in number 10, risk comprises the probability that an insurance company will be required to compensate or pay a claim on a party affected by the occurrence of a risk as stipulated by the insurance policy previously underwritten. Similarly, the definition in number 11 asserts that risk involves the property that is stipulated in the insurance policy. This definition does not clearly distinguish between the risk and the risk management approach. On the basis of definition number 11b, one may argue that risk originates from the property that is covered by the insurance. Despite the fact that properties insured are characterised by inherent risk, the properties are not necessarily the source of risk or hazard.
Nevertheless, the two definitions highlight the fact that it is possible for individual or an entity to take caution against the negative outcome associated with occurrence of risk. However, the definition only limits the management of risk to the concept of transferring or sharing the negative consequences of risk to a third party. Therefore, the definition does not recognise the existence of other approaches that can be taken into consideration in the process of managing risks (Kavaler & Spiegel 2003).
Some of the notable risk management strategies that the definition has ignored entail risk avoidance or risk elimination, risk reduction and risk retention. Through these approaches it is possible for an individual or entity to successfully manage the negative consequences emanating from risk occurrence without necessarily involving a third party. With regard to avoidance, it is possible to manage risk by desisting from activities or aspects that are a source of risk or hazard. Risk reduction can be achieved by implementing strategies that would significantly minimise the possible loss that might emanate from the risk occurring. Conversely, risk retention entails a strategy whereby a party decides to self manage the consequences associated with the negative consequences of a risk. Risk retention is mainly applicable if the nature of the risk cannot be successfully transferred or shared with a third party such as the insurance company. Examples of such risks relate to occurrences that culminate in huge losses such as natural catastrophes. Therefore, the definition assumes that all risks are transferable (Kavaler & Spiegel 2003).
Similarities and differences
The definitions on risk advanced can further be evaluated on the basis of their similarities and differences. One of the similarities relates to the fact that all the definitions highlight the fact that risks involve uncertainty (Garvey 2008). Consequently, the level of knowledge on the chance of the risk occurring is significantly limited. Considering the fact that risk involves probability, the definitions underline that it is imperative for individuals to be conversant with the likelihood of occurrence. Additionally, the definitions underscore the fact that
Another similarity evident in the definitions entails the fact that the occurrence of risk leads to negative outcome or loss. The nature of the loss from the definitions varies. Some of the definitions focus on environmental and health loss. According to the definition outlined in number 8 of the appendix, risk leads to harmful effects to ecological systems or human health because of environmental stressors. Moreover, the definitions further emphasise that risks are stimulated by hazards that originate from the external or the internal environment.
Unlike the other definitions outlined in the appendix, the definition stipulated by number 10 of the table underscore the fact that risk can be managed by a third party. Out of the 12 definitions outlined in the table, it is only definition number 10 that recognises the importance of risk management through underwriting.
Risk definition that stands out as particularly different
On the basis of the definitions outlined in the appendix, one of the definitions that stand out as particularly different from the others entails definition number 8. Its unique nature arises from the fact that it emphasises on the fact that risk involves harmful effects on ecological systems and human health due to environmental triggers. This definition confines the source of risk or hazard to environmental stressors. Thus, it does not appreciate the fact that risk may be triggered by different aspects such as human or artificial hazards.
The second definition that is unique relates to the assertion that risk emanates from a chosen action or inaction hence leading to loss [definition number 1]. Unlike the risk definition in number 8, this definition stipulates that risk originate from artificial factors as specified by the concept of chosen action or inaction.
Choice of the best definition
All the definitions outlined try to explain the definition of risk. However, the definition that best contributes to my personal understanding of risk entails definition number 3. This definition stresses that risk involves a combination of the likelihood or probability of an event occurring and the resulting consequences. Therefore, this definition underscores the fact that the occurrence of risk is not certain (Damodaran 2008). Moreover, the definition argues that risk arises from an event. The definition does not limit the source of event or hazard from natural or artificial factors. On the basis of this aspect, risk can either arise due to artificial or natural factors. Furthermore, the definition highlights the fact that there are consequences that might be associated with the occurrence of the event (Cretu, Stewart & Berends 2011).
Despite the fact that the consequences associated with risk are usually perceived to be negative, it is possible for an entity or organisation to positively manage the risk hence contributing to benefits. The definition further asserts that it is possible to measure risk by assessing the probability of risk occurring and the resulting consequences. Thus, it is possible for an individual or entity to make a decision on the desired approach to manage the risk based on the degree of risk measured.
Definition that is strongly disagreed with
In my opinion, the definition that I strongly disagree with entails the assertions that risk entails the chance that an insurance company will pay a claim on a previously underwritten policy. This definition assumes that the insurance company will pay the claim issued in the event of a risk occurring. However, it is not necessarily true that the insurance company will pay a claim on a risk advanced. On the contrary, the insurance company undertakes extensive review of the sequence of occurrences that led to the risk. If the occurrence are not aligned with what the underwritten policy stipulates, then the likelihood of the insurance company paying the claim advanced are minimal. This means that payment of a claim only occurs if the occurrences that led to the risk are aligned with what was previously stated in the policy document.
The above analysis illustrates existence of concerted effort amongst scholars and practitioners to defined risk. The definitions proposed are characterised by significant similarities and differences. Most of the definitions argue that risk result in loss or harm. However, some of the definitions argue that it is possible to benefit from risk through effective risk management approaches. If given an opportunity to present to a public community about risk, the most appropriate definition that I would select entails the assertion that risk entails a combination of probability of an undesirable event and the consequence associated with such an event. The rationale of choosing this definition is that it underscores the fact that it highlights the fact that risk entails probability of an event occurring.
Cretu, O, Stewart, R & Berends, T 2011, Risk management for design and construction, John Wiley & Sons, Hoboken.
Damodaran, A 2008, Strategic risk taking; a framework for risk management, Wharton School Publishers, New Jersey.
Garvey, P 2008, Analytical methods of risk management; systems engineering perspective, CRC Press, New York.
Kavaler, F & Spiegel, A 2003, Risk management in healthcare institutions, Jones and Bartlett Publishers, Sudbury, Massachusetts.